Wednesday, September 30, 2009

Last Saturday was a historical moment for the US. In Oakland, CA we held the first Festival of Grassroots Economics. The first in the country and one of the first in the world (mainly behind Brazil) to demonstrate that a positive alternative exists to capitalism, corporatization and centralized economic corruption. We wanted to show and strengthen the already existing alternative grassroots economy here in the Bay Area. I believe we are on the cutting edge of a movement that will inevitably change the world more than we had ever hoped maybe even just 5 years ago.

It was just a handful of us from worker cooperatives and from activist backgrounds that planned this for a year with no funding. None of us came from any position of authority or power in a nonprofit or government or big business. All of us are pretty low on the pay scale. To be more specific- a retired printer, a car washer, an unemployed person, a caterer, and a food co-op worker-owner. So I suppose it should be no surprise that those who where interested enough to come reflected that demography as well.

I was so happy to see the chairs all filled, people on the edge of their seats, great diversity especially in terms of race, and lots of regular folks. This is what it was supposed to be about- the grassroots economy from the bottom up. But I have to say I am shocked by the lack of presence and interest by nonprofit leaders, intellectuals, the media and government officials. Things would be much easier and faster if they'd throw their weight behind this, but they weren't in charge and maybe they are not used to being led by the people and to listening for a change instead of thinking of themselves as leaders who already have the right ideas.

They are behind the curve. We are moving forward. I hope they catch up soon. We need all hands on deck and time is ticking. But I suppose this is the way it needs to be - untainted, uncoopted people power. Maybe we need to be stronger and have more formed ideas and proposals. Though the concept of a grassroots economy appears to be very intuitively inspiring to most people I talked to and the people who showed up seemed very moved.

I guess we always knew the people would have to lead the revolution, in fact, that's perhaps the only kind of revolution worth having.

Monday, September 28, 2009

It's been a year, but it feels like yesterday since Kirsten Brydum passed away.

Kirsten was one of my best friends and the founder of the San Francisco Really Really Free Market.We helped coordinate this event for several years. She also started a sliding scale community cafe called Access Cafe. Together she and I coordinated a small free skool and infoshop called Dirty Dove, named after the ubiquitous resilient city doves we call pigeons. We tried and failed to save the most radically progressive college in the country, New College.

Before she was brutally murdered in New Orleans, Kirsten was traveling on a shoestring budget across the country on a tour. The concept was called Collective Autonomy, which surpassed ideological boundaries in an attempt to connect all sorts of grassroots mutual aid projects in the US, defying the notion that we must ask for permission or wait for a politician to be voted into office in order to take care of each other.

Kirsten dove into her most idealistic activist work with furious passion. She wasn't looking for a nonprofit career. She was looking to foster a movement that demonstrates we are more powerful than we ever dreamed to change the world.

On the same day as the Really Really Free Market, I helped host the first Festival of Grassroots Economics, a sort of collective autonomy from capitalism here in the Bay Area. No doubt she would have been proud.

It eases my mind to know that her murder which mostly likely stemmed from rage against severe economic and racial oppression, is now turning into all kinds of positive fruition. New Orleans had its first Really Really Free Market in her honor one year later as some kind of poetic justice.

And I am emboldened by her spirit. I used to have a fire lit under me that made me burst into Legislators' offices and yell at their staff about how corrupt they were. And then the spirit waned a bit, weary from years of activism and many failed fights perhaps subconsciously questioning whether to stick my neck out for a battle that would most likely be lost. But she sparked me constantly to stand up and fight and to be as radical as I could possibly be and to believe that things could so radically be better- the Really Really Free Market for 4 hours a month is proof. But in this I no longer have a female counterpart, as we were called the towers of power - an ironic label for we were both very tiny women.

I've spent the last year and half myself fighting for my life against Lyme disease which has its own economic roots that I won't get into. Capitalism indeed nearly killed me. But somehow I survived and she is gone. May we all be lit by her fire, put aside our petty self concerns and start this movement.

Kirsten liked the term immediatism. That means the time is now. You don't wait until you have enough money in the bank, you don't wait until you get the right job, you don't wait until after your favorite TV show is over or you get to take a vacation. You just do it now. Now is all you've got. If you think you've got years to make the world a better place, you are wrong. The world needs you now more than ever. Your community needs you now more than ever. And you might not be around in a couple of years. Kirsten at age 25 healthy and myself at age 32 healthy proved that. I was the luckier one, but now I need to, we all need to carry her work forward.

Yesterday, I moderated a panel discussion and had many great conversations at the Festival for Grassroots Economies, where brilliant ideas seemed to be generated, on average, every 2 seconds. My mind is still spinning from it all, but I thought I'd stop and try to capture at least a tidbit.

A memorable moment was when attorney Jenny Kassan boldly suggested that we need a local stock exchange to serve as a source of finance for small local businesses and to keep our investments in the community (as opposed to putting our savings into mutual funds and financing who-knows-what kind of companies). It's really a genius idea - it could create a simple way for each of us to share in owning and nurturing the businesses that serve us. We would choose to finance the businesses we feel could successfully enhance the character of our neighborhoods, provide a needed local service or product, create local jobs, and be accountable to the community. Most folks trading on the New York Stock Exchange don't take any of this into consideration.

Jenny Kassan cited Michael Shuman, author of The Small-Mart Revolution. Shuman recently blogged about the concept of local stock exchanges. A major reason we don't have local stock exchanges now, Shuman points out, is that securities laws have made it prohibitively expensive for small businesses to make a public offering. Shuman writes:

"The regulations prohibit the average American from investing in any small business, unless the firm is willing to spend $50,000 to $100,000 on lawyers to prepare private placement memorandum or public offering--thick documents with microscopic, ALL CAPS PRINT that no human being has ever been observed actually reading."

But Shuman suggests some simple changes to the securities laws, that could make it a lot easier for small businesses to seek investors. For example, he suggests that we could exempt from securities regulation any small businesses that issues $250,000 or less in total stock, offers the stock only to people living in the state, and allow each investor to purchase no more than $100 worth of stock.

In the same way that many of us have made micro-loans through organizations such as Kiva, we could make investments of a comparable size in businesses locally. We'll see the returns in many ways - not only in the growth of our investment money, but in the growth of flourishing businesses all around us.

Tuesday, September 22, 2009

Venezuelans line up to pay for their books during the last day of the International Book Fair in Caracas Nov. 16. Books printed by government publishers sell for as little as $1. Democracy from the bottom is evolving as a 10-year social revolution in Venezuela. Led by President Hugo Chavez, the United Socialist Party of Venezuela (PSUV) gained over 1.5 million voters in the most recent elections Nov. 23.

“It was a wonderful victory,” said Professor Carmen Carrero with the communications studies department of the Bolivarian University in Caracas. “We won 81 percent of the city mayor positions and 17 of 23 state governors,” Carrero reported.

The Bolivarian University is housed in the former oil ministry building and now serves 8,000 students throughout Venezuela. The university (Universidad Bolivariana de Venezuela) is symbolic of the democratic socialist changes occurring throughout the country.

Before the election of Hugo Chavez as president in 1998, college attendance was primarily for the rich in Venezuela. Today over 1.8 million students attend college, three times the rate 10 years ago.

“Our university was established to resist domination and imperialism,” reported Principal (President) Marlene Yadira Cordova in an interview Nov. 10. “We are a university where we have a vision of life that the oppressed people have a place on this planet.”

The enthusiasm for learning and serious, thoughtful questions asked by students I saw that day was certainly representative of a belief in the potential of positive social change for human betterment. The university offers a fully-staffed free healthcare clinic, zero tuition and basic no-cost food for students in the cafeteria, all paid for by the oil revenues now being democratically shared by the people.

Bottom up democracy in Venezuela starts with the 25,000 community councils elected in every neighborhood in the country. “We establish the priority needs of our area,” reported community council spokesperson Carmon Aponte, with the neighborhood council in the barrio Bombilla area of western Caracas.

I interviewed Carmon while visiting the Patare community TV and radio station, one of 34 locally controlled community television stations and 400 radio stations now in the barrios throughout Venezuela. Community radio, TV and newspapers are the voice of the people, where they describe the viewers and listeners as the “users” of media instead of the passive audiences.

Democratic socialism means healthcare, jobs, food and security in neighborhoods where in many cases nothing but absolute poverty existed 10 years ago. With unemployment down to a U.S. level, sharing the wealth has taken real meaning in Venezuela.

Despite a 50 percent increase in the price of food last year, local Mercals offer government subsidized cooking oil, corn meal, meat and powered milk at 30-50 percent off market price. Additionally, there are now 3,500 local communal banks with a $1.6 billion dollar budget offering neighborhood-based micro-financing loans for home improvements, small businesses and personal emergencies.

“We have moved from a time of disdain [pre-revolution, when the upper classes saw working people as less than human] to a time of adjustment,” proclaimed Ecuador’s minister of culture, Gallo Mora Witt, at the opening ceremonies of the Fourth International Book Fair in Caracas Nov. 7. Venezuela’s minister of culture, Hector Soto, added, “We try not to leave anyone out … Before the revolution the elites published only 60-80 books a year; we will publish 1,200 Venezuelan authors this year … The book will never stop being the important tool for cultural feelings.”

In fact, some 25 million books – classics by Victor Hugo and Miguel de Cervantes along with Cindy Sheehan’s “Letter to George Bush” – were published in 2008 and are being distributed to the community councils nationwide. The theme of the International Book Fair was books as cultural support to the construction of the Bolivarian revolution and building socialism for the 21st century.

In Venezuela the corporate media are still owned by the elites. The five major TV networks and nine of 10 of the major newspapers maintain a continuing media effort to undermine Chavez and the socialist revolution.

But despite the corporate media and continuing U.S. taxpayer financial support to the anti-Chavez opposition institutions from USAID and the National Endowment for Democracy ($20 million annually), two thirds of the people in Venezuela continue to support President Hugo Chavez and the United Socialist Party of Venezuela.

The democracies of South America are realizing that the neo-liberal formulas for capitalism are not working for the people and that new forms of resource allocation are necessary for human betterment. It is a learning process for all involved and certainly a democratic effort from the bottom up.

Peter Phillips is a professor of sociology at Sonoma State University and director of Project Censored. The “Censored 2009″ yearbook was just released in Spanish at the 2008 International Book Fair in Caracas. He can be reached at phillipp@sonoma.edu.

Monday, September 21, 2009

This document presents details on the wealth and income distributions in the United States, and explains how we use these two distributions as power indicators.

Some of the information might be a surprise to many people. The most amazing numbers on income inequality come last, showing the change in the ratio of the average CEO's paycheck to that of the average factory worker over the past 40 years.

First, though, some definitions. Generally speaking, wealth is the value of everything a person or family owns, minus any debts. However, for purposes of studying the wealth distribution, economists define wealth in terms of marketable assets, such as real estate, stocks, and bonds, leaving aside consumer durables like cars and household items because they are not as readily converted into cash and are more valuable to their owners for use purposes than they are for resale (see Wolff, 2004, p. 4, for a full discussion of these issues). Once the value of all marketable assets is determined, then all debts, such as home mortgages and credit card debts, are subtracted, which yields a person's net worth. In addition, economists use the concept of financial wealth, which is defined as net worth minus net equity in owner-occupied housing. As Wolff (2004, p. 5) explains, "Financial wealth is a more 'liquid' concept than marketable wealth, since one's home is difficult to convert into cash in the short term. It thus reflects the resources that may be immediately available for consumption or various forms of investments."

We also need to distinguish wealth from income. Income is what people earn from wages, dividends, interest, and any rents or royalties that are paid to them on properties they own. In theory, those who own a great deal of wealth may or may not have high incomes, depending on the returns they receive from their wealth, but in reality those at the very top of the wealth distribution usually have the most income.The Wealth Distribution

In the United States, wealth is highly concentrated in a relatively few hands. As of 2004, the top 1% of households (the upper class) owned 34.3% of all privately held wealth, and the next 19% (the managerial, professional, and small business stratum) had 50.3%, which means that just 20% of the people owned a remarkable 85%, leaving only 15% of the wealth for the bottom 80% (wage and salary workers). In terms of financial wealth (total net worth minus the value of one's home), the top 1% of households had an even greater share: 42.2%. Table 1 and Figure 1 present further details drawn from the careful work of economist Edward N. Wolff at New York University (2007).

Figure 1: Net worth and financial wealth distribution in the U.S. in 2004

In terms of types of financial wealth, the top one percent of households have 36.7% of all privately held stock, 63.8% of financial securities, and 61.9% of business equity. The top 10% have 85% to 90% of stock, bonds, trust funds, and business equity, and over 75% of non-home real estate. Since financial wealth is what counts as far as the control of income-producing assets, we can say that just 10% of the people own the United States of America.

Figures on inheritance tell much the same story. According to a study published by the Federal Reserve Bank of Cleveland, only 1.6% of Americans receive $100,000 or more in inheritance. Another 1.1% receive $50,000 to $100,000. On the other hand, 91.9% receive nothing (Kotlikoff & Gokhale, 2000). Thus, the attempt by ultra-conservatives to eliminate inheritance taxes -- which they always call "death taxes" for P.R. reasons -- would take a huge bite out of government revenues for the benefit of less than 1% of the population. (It is noteworthy that some of the richest people in the country oppose this ultra-conservative initiative, suggesting that this effort is driven by anti-government ideology. In other words, few of the ultra-conservatives behind the effort will benefit from it in any material way.)

For the vast majority of Americans, their homes are by far the most significant wealth they possess. Figure 3 comes from the Federal Reserve Board's Survey of Consumer Finances (via Wolff, 2007) and compares the median income, total wealth (net worth, which is marketable assets minus debt), and non-home wealth (which earlier we called financial wealth) of White, Black, and Hispanic households in the U.S.

Figure 3: Income and wealth by race in the U.S.

Besides illustrating the significance of home ownership as a measure of wealth, the graph also shows how much worse Black and Latino households are faring overall, whether we are talking about income or net worth. In 2004, the average white household had 10 times as much total wealth as the average African-American household, and 21 times as much as the average Latino household. If we exclude home equity from the calculations and consider only financial wealth, the ratios are more startling: 120:1 and 360:1, respectively. Extrapolating from these figures, we see that 69% of white families' wealth is in the form of their principal residence; for Blacks and Hispanics, the figures are 97% and 98%, respectively.Historical context

Numerous studies show that the wealth distribution has been extremely concentrated throughout American history, with the top 1% already owning 40-50% in large port cities like Boston, New York, and Charleston in the 19th century (Keister, 2005). It was very stable over the course of the 20th century, although there were small declines in the aftermath of the New Deal and World II, when most people were working and could save a little money. There were progressive income tax rates, too, which took some money from the rich to help with government services.

Then there was a further decline, or flattening, in the 1970s, but this time in good part due to a fall in stock prices, meaning that the rich lost some of the value in their stocks. By the late 1980s, however, the wealth distribution was almost as concentrated as it had been in 1929, when the top 1% had 44.2% of all wealth. It has continued to edge up since that time, with a slight decline from 1998 to 2004, before the economy crashed in the late 2000s and little people got pushed down again. Table 3 and Figure 4 present the details from 1922 through 2004.

Figure 4: Share of wealth held by the Bottom 99% and Top 1% in the United States, 1922-2004.

Here are some dramatic facts that sum up how the wealth distribution became even more concentrated between 1983 and 2004, in good part due to the tax cuts for the wealthy and the defeat of labor unions: Of all the new financial wealth created by the American economy in that 21-year-period, fully 42% of it went to the top 1%. A whopping 94% went to the top 20%, which of course means that the bottom 80% received only 6% of all the new financial wealth generated in the United States during the '80s, '90s, and early 2000s (Wolff, 2007).The rest of the world

Thanks to a 2006 study by the World Institute for Development Economics Research -- using statistics for the year 2000 -- we now have information on the wealth distribution for the world as a whole, which can be compared to the United States and other well-off countries. The authors of the report admit that the quality of the information available on many countries is very spotty and probably off by several percentage points, but they compensate for this problem with very sophisticated statistical methods and the use of different sets of data. With those caveats in mind, we can still safely say that the top 10% of the world's adults control about 85% of global household wealth -- defined very broadly as all assets (not just financial assets), minus debts. That compares with a figure of 69.8% for the top 10% for the United States. The only industrialized democracy with a higher concentration of wealth in the top 10% than the United States is Switzerland at 71.3%. For the figures for several other Northern European countries and Canada, all of which are based on high-quality data, see Table 4.Table 4: Percentage of wealth held by the Top 10% of the adult population in various Western countriescountry wealth ownedby top 10%Switzerland 71.3%United States 69.8%Denmark 65.0%France 61.0%Sweden 58.6%UK 56.0%Canada 53.0%Norway 50.5%Germany 44.4%Finland 42.3%

The Relationship Between Wealth and Power

What's the relationship between wealth and power? To avoid confusion, let's be sure we understand they are two different issues. Wealth, as I've said, refers to the value of everything people own, minus what they owe, but the focus is on "marketable assets" for purposes of economic and power studies. Power, as explained elsewhere on this site, has to do with the ability (or call it capacity) to realize wishes, or reach goals, which amounts to the same thing, even in the face of opposition (Russell, 1938; Wrong, 1995). Some definitions refine this point to say that power involves Person A or Group A affecting Person B or Group B "in a manner contrary to B's interests," which then necessitates a discussion of "interests," and quickly leads into the realm of philosophy (Lukes, 2005, p. 30). Leaving those discussions for the philosophers, at least for now, how do the concepts of wealth and power relate?

First, wealth can be seen as a "resource" that is very useful in exercising power. That's obvious when we think of donations to political parties, payments to lobbyists, and grants to experts who are employed to think up new policies beneficial to the wealthy. Wealth also can be useful in shaping the general social environment to the benefit of the wealthy, whether through hiring public relations firms or donating money for universities, museums, music halls, and art galleries.

Second, certain kinds of wealth, such as stock ownership, can be used to control corporations, which of course have a major impact on how the society functions. Tables 5a and 5b show what the distribution of stock ownership looks like. Note how the top one percent's share of stock equity increased (and the bottom 80 percent's share decreased) between 2001 and 2004.

Both tables' data from Wolff (2007). Includes direct ownership of stock shares and indirect ownership through mutual funds, trusts, and IRAs, Keogh plans, 401(k) plans, and other retirement accounts. All figures are in 2004 dollars.

Third, just as wealth can lead to power, so too can power lead to wealth. Those who control a government can use their position to feather their own nests, whether that means a favorable land deal for relatives at the local level or a huge federal government contract for a new corporation run by friends who will hire you when you leave government. If we take a larger historical sweep and look cross-nationally, we are well aware that the leaders of conquering armies often grab enormous wealth, and that some religious leaders use their positions to acquire wealth.

There's a fourth way that wealth and power relate. For research purposes, the wealth distribution can be seen as the main "value distribution" within the general power indicator I call "who benefits." What follows in the next three paragraphs is a little long-winded, I realize, but it needs to be said because some social scientists -- primarily pluralists -- argue that who wins and who loses in a variety of policy conflicts is the only valid power indicator (Dahl, 1957, 1958; Polsby, 1980). And philosophical discussions don't even mention wealth or other power indicators (Lukes, 2005). (If you have heard it all before, or can do without it, feel free to skip ahead to the last paragraph of this section)

Here's the argument: if we assume that most people would like to have as great a share as possible of the things that are valued in the society, then we can infer that those who have the most goodies are the most powerful. Although some value distributions may be unintended outcomes that do not really reflect power, as pluralists are quick to tell us, the general distribution of valued experiences and objects within a society still can be viewed as the most publicly visible and stable outcome of the operation of power.

In American society, for example, wealth and well-being are highly valued. People seek to own property, to have high incomes, to have interesting and safe jobs, to enjoy the finest in travel and leisure, and to live long and healthy lives. All of these "values" are unequally distributed, and all may be utilized as power indicators. However, the primary focus with this type of power indicator is on the wealth distribution sketched out in the previous section.

The argument for using the wealth distribution as a power indicator is strengthened by studies showing that such distributions vary historically and from country to country, depending upon the relative strength of rival political parties and trade unions, with the United States having the most highly concentrated wealth distribution of any Western democracy except Switzerland. For example, in a study based on 18 Western democracies, strong trade unions and successful social democratic parties correlated with greater equality in the income distribution and a higher level of welfare spending (Stephens, 1979).

And now we have arrived at the point I want to make. If the top 1% of households have 30-35% of the wealth, that's 30 to 35 times what we would expect by chance, and so we infer they must be powerful. And then we set out to see if the same set of households scores high on other power indicators (it does). Next we study how that power operates, which is what most articles on this site are about. Furthermore, if the top 20% have 84% of the wealth (and recall that 10% have 85% to 90% of the stocks, bonds, trust funds, and business equity), that means that the United States is a power pyramid. It's tough for the bottom 80% -- maybe even the bottom 90% -- to get organized and exercise much power.Income and Power

The income distribution also can be used as a power indicator. As Table 6 shows, it is not as concentrated as the wealth distribution, but the top 1% of income earners did receive 17% of all income in the year 2003. That's up from 12.8% for the top 1% in 1982, which is quite a jump, and it parallels what is happening with the wealth distribution. This is further support for the inference that the power of the corporate community and the upper class have been increasing in recent decades.

The rising concentration of income can be seen in a special New York Times analysis of an Internal Revenue Service report on income in 2004. Although overall income had grown by 27% since 1979, 33% of the gains went to the top 1%. Meanwhile, the bottom 60% were making less: about 95 cents for each dollar they made in 1979. The next 20% - those between the 60th and 80th rungs of the income ladder -- made $1.02 for each dollar they earned in 1979. Furthermore, the Times author concludes that only the top 5% made significant gains ($1.53 for each 1979 dollar). Most amazing of all, the top 0.1% -- that's one-tenth of one percent -- had more combined pre-tax income than the poorest 120 million people (Johnston, 2006).

But the increase in what is going to the few at the top did not level off, even with all that. As of 2007, income inequality in the United States was at an all-time high for the past 95 years, with the top 0.01% -- that's one-hundredth of one percent -- receiving 6% of all U.S. wages, which is double what it was for that tiny slice in 2000; the top 10% received 49.7%, the highest since 1917 (Saez, 2009).

A key factor behind the high concentration of income, and the likely reason that the concentration has been increasing, can be seen by examining the distribution of what is called "capital income": income from capital gains, dividends, interest, and rents. In 2003, just 1% of all households -- those with after-tax incomes averaging $701,500 -- received 57.5% of all capital income, up from 40% in the early 1990s. On the other hand, the bottom 80% received only 12.6% of capital income, down by nearly half since 1983, when the bottom 80% received 23.5%. Figure 5 and Table 7 provide the details.

Another way that income can be used as a power indicator is by comparing average CEO annual pay to average factory worker pay, something that Business Week has been doing for many years now. The ratio of CEO pay to factory worker pay rose from 42:1 in 1960 to as high as 531:1 in 2000, at the height of the stock market bubble, when CEOs were cashing in big stock options;. It was at 411:1 in 2005. By way of comparison, the same ratio is about 25:1 in Europe. The changes in the American ratio are displayed in Figure 6.

Figure 6: CEOs' pay as a multiple of the average worker's pay

It's even more revealing to compare the actual rates of increase of the salaries of CEOs and ordinary workers; from 1990 to 2005, CEOs' pay increased almost 300% (adjusted for inflation), while production workers gained a scant 4.3%. The purchasing power of the federal minimum wage actually declined by 9.3%, when inflation is taken into account. These startling results are illustrated in Figure 7.

Figure 7: CEOs' average pay, production workers' average pay, the S&P 500 Index, corporate profits, and the federal minimum wage, 1990-2005 (all figures adjusted for inflation)Source: Executive Excess 2006, the 13th Annual CEO Compensation Survey from the Institute for Policy Studies and United for a Fair Economy.

If you wonder how such a large gap could develop, the proximate, or most immediate, factor involves the way in which CEOs now are able to rig things so that the board of directors, which they help select -- and which includes some fellow CEOs on whose boards they sit -- gives them the pay they want. The trick is in hiring outside experts, called "compensation consultants," who give the process a thin veneer of economic respectability.

The process has been explained in detail by a retired CEO of DuPont, Edgar S. Woolard, Jr., who is now chair of the New York Stock Exchange's executive compensation committee. His experience suggests that he knows whereof he speaks, and he speaks because he's concerned that corporate leaders are losing respect in the public mind. He says that the business page chatter about CEO salaries being set by the competition for their services in the executive labor market is "bull." As to the claim that CEOs deserve ever higher salaries because they "create wealth," he describes that rationale as a "joke," says the New York Times (Morgenson, 2005, Section 3, p. 1).

Here's how it works, according to Woolard:

The compensation committee [of the board of directors] talks to an outside consultant who has surveys you could drive a truck through and pay anything you want to pay, to be perfectly honest. The outside consultant talks to the human resources vice president, who talks to the CEO. The CEO says what he'd like to receive. It gets to the human resources person who tells the outside consultant. And it pretty well works out that the CEO gets what he's implied he thinks he deserves, so he will be respected by his peers. (Morgenson, 2005.)

The board of directors buys into what the CEO asks for because the outside consultant is an "expert" on such matters. Furthermore, handing out only modest salary increases might give the wrong impression about how highly the board values the CEO. And if someone on the board should object, there are the three or four CEOs from other companies who will make sure it happens. It is a process with a built-in escalator.

As for why the consultants go along with this scam, they know which side their bread is buttered on. They realize the CEO has a big say-so on whether or not they are hired again. So they suggest a package of salaries, stock options and other goodies that they think will please the CEO, and they, too, get rich in the process. And certainly the top executives just below the CEO don't mind hearing about the boss's raise. They know it will mean pay increases for them, too. (For an excellent detailed article on the main consulting firm that helps CEOs and other corporate executives raise their pay, check out the New York Times article entitled "America's Corporate Pay Pal", which supports everything Woolard of DuPont claims and adds new information.)

There's a much deeper power story that underlies the self-dealing and mutual back-scratching by CEOs now carried out through interlocking directorates and seemingly independent outside consultants. It probably involves several factors. At the least, on the worker side, it reflects an increasing lack of power following the all-out attack on unions in the 1960s and 1970s, which is explained in detail by the best expert on recent American labor history, James Gross (1995), a labor and industrial relations professor at Cornell. That decline in union power made possible and was increased by both outsourcing at home and the movement of production to developing countries, which were facilitated by the break-up of the New Deal coalition and the rise of the New Right (Domhoff, 1990, Chapter 10). It signals the shift of the United States from a high-wage to a low-wage economy, with professionals protected by the fact that foreign-trained doctors and lawyers aren't allowed to compete with their American counterparts in the direct way that low-wage foreign-born workers are.

On the other side of the class divide, the rise in CEO pay may reflect the increasing power of chief executives as compared to major owners and stockholders in general, not just their increasing power over workers. CEOs may now be the center of gravity in the corporate community and the power elite, displacing the leaders in wealthy owning families (e.g., the second and third generations of the Walton family, the owners of Wal-Mart). True enough, the CEOs are sometimes ousted by their generally go-along boards of directors, but they are able to make hay and throw their weight around during the time they are king of the mountain. (It's really not much different than that old children's game, except it's played out in profit-oriented bureaucratic hierarchies, with no other sector of society, like government, willing or able to restrain the winners.)

The claims made in the previous paragraph need much further investigation. But they demonstrate the ideas and research directions that are suggested by looking at the wealth and income distributions as indicators of power.

Further Information

* The 2007 Wolff paper is on-line at http://www.levy.org/vdoc.aspx?docid=929 * The Census Bureau report is on line at http://www.census.gov/hhes/www/wealth/wealth.html * The World Institute for Development Economics Research (UNU-WIDER) report on household wealth throughout the world is available at http://tinyurl.com/wdhw08; see the WIDER site for more about their research. * For good summaries of other information on wealth and income, and for information on the estate tax, see the United For A Fair Economy site at http://www.faireconomy.org/ * The New York Times ran an excellent series of articles on executive compensation in the fall of 2006 entitled "Gilded Paychecks." Look for it by searching the archives on NYTimes.com. * To see a video of Ed Woolard giving his full speech about executive compensation, go to http://www.compensationstandards.com/nonmember/EdWoolard_video.asp (WMV file, may not be viewable on all platforms/browsers) * The Shapiro & Friedman paper on capital income, along with many other reports on the federal budget and its consequences, are available at the Center on Budget and Policy Priorities site: http://www.cbpp.org/pubs/recent.html * The AFL-CIO maintains a site called "Executive Paywatch," which summarizes information about the salary disparity between executives and other workers: http://www.aflcio.org/paywatch/ * More raw numbers about the unequal wealth distribution in the U.S. are available at Inequality.org: http://www.inequality.org/facts.html * Emmanuel Saez, Professor of Economics at UC Berkeley, has written or co-authored a number of papers on income inequality and related topics: http://elsa.berkeley.edu/~saez/

Polsby, N. (1980). Community Power and Political Theory (Second ed.). New Haven, CT: Yale University Press.

Russell, B. (1938). Power: A New Social Analysis. London: Allen and Unwin.

Saez, E. (2009). Striking It Richer: The Evolution of Top Incomes in the United States (Update with 2007 Estimates). Retrieved August 28, 2009 from http://elsa.berkeley.edu/~saez/saez-UStopincomes-2007.pdf.

Sunday, September 13, 2009

It's rumoured the free market died in September 2008. Ever since, some people have been gleefully shovelling in the dirt in an attempt to makesure 'free market' ideology is truly buried. Others are proclaiming, "the 'free market' is dead, long live the 'free market'."

Both are a bit deluded.

Last year's meltdown on Wall Street has vaporized the ground on which the old anti-market and pro-market duel was fought. An era of 'market reforms' seems to be giving way to a period when you and i - as citizens first and as buyers and sellers second - can express our freedom to reform the market.

Before mapping how this is happening, let us unbundle 'free' from 'market'. Our experience tells us freedom works. People have been coming together for the last 5,000 years in bazaars to exchange ideas, stories, goods and services. It was just about 200 years ago that these socially embedded bazaars were overwhelmed by an ideology called the 'free market', which held that the dance of supply and demand is not only the most reliable way of organizing material exchange but society itself.

Over the last few decades, societies across the world have renewed their fight against this version of a 'free market'. They seek to reconnect the good of the market system with social, ethical and ecological values. This is a two-fold rebellion. It wants democratic governments to ensure basic rights and entitlements but not become an overweight all-providing parent. The rebels are even more passionately fighting a market culture that enriches the already powerful.

Deep inside academia some of the rebels, who go by the name 'Post-Autistic Economics Network', a web-based network, are forging analytical tools that reconnect economics with social, ethical and ecological concerns. This work is supported by developments, at the interface of economics and neurological research, which show that human beings are not quite the self-aggrandizing individual units that classical economics led us to believe. Earlier this month Nobel Prize-winning economist Paul Krugman added energy to these trends in an essay for the New York Times magazine titled "How Did Economists Get It So Wrong?"

Social activists and innovators in different corners of the world are reminding us that money is essentially an agreement based on trust, so we need not limit ourselves to money issued by governments or banks. Communities, who define themselves either by a common interest or by geographical proximity, are creating their own complementary currencies. They find that this not only gives them an advantage in interacting with the national and international economy but also links the freedom of bazaars with caring - which the tough-luck variety of 'free market' said must be restricted to family or charity.

A segment of computer software designers have used the freedom to cooperate as the basis for a different business model. The bulk of servers through which we tap the Internet are running on software that is part of this model. It is known as both free software and open source. Their success overturns one of the most basic assumptions of the cramping version of 'free market' - that technological innovation is necessarily driven by the desire for windfall money profit.

Others working at the interface of environment and business have begun to redefine the concept of profit by rallying support for a triple bottom line. The old style 'free market' recognized only one bottom line - money profits. Today, many major corporations accept, at least in principle, they must not only make money but also show the social and environmental good they have generated. Across the world, an elaborate service industry now provides research and number crunching for triple bottom line accounting.

This, in turn, has fed the Socially Responsible Investing (SRI) sector, which now commands approximately $3 trillion globally. SRI funds apply both negative and positive screens. For example, they will not invest in a company that is destroying pristine forests or employing child labour. And they will seek out companies that are adopting technologies and business models that foster both social justice and environmental regeneration.

If all these trends have been gathering steam for well over two decades, you might ask, why was there a meltdown? Amy Domini, a pioneer of SRI, suggests this is partly because a hangover 'macho' attitude has remained deeply entrenched on Wall Street.

Those who are busy reconfiguring the market culture are not deluded idealists. They do not attempt to abolish greed and fear. Instead, they aim to locate the market mechanism in a more well-rounded view of reality.

Whether or not the meltdown has accelerated these trends is a matter of dispute. What matters is that these counter energies exist and they dare us to overcome the force of habit to explore how markets can be re-formed to fulfill both our individual desires as well as our need to serve the common good.

The writer's book, Bazaars, Conversations and Freedom: For a Market Culture Beyond Greed and Fear is recently published

Friday, September 11, 2009

It’s now a clear-cut fact that today’s positive-interest-based monetary system is a huge hurdle against our sustainable lifestyle as well as our economic activities. Silvio Gesell(1862-1930), a German-Argentinean merchant and economist, is a remarkable figure who suggested how to reform this paradigm on his masterpiece “The Natural Economic Order.”

He starts his argument with the fact that money is at a privileged position in comparison with other goods. In general commodities are depreciated as the time passes by and you can’t sell yesterday’s newspaper or one-year-old apples while you can hoard your money as long as you like without suffering from any loss at all(in case of no inflation: note that Germany adopted the gold standard when he wrote that book), which allows bearers of notes to charge the compound interest on lending them to somebody in need. The more money you have the more profit you can earn by this financing, enabling the superrich to live solely on such income while most of the poor are asked to contribute to them.

So what was Gesell’s idea?: “To abolish the privilege of money.” People prefer money to goods on storing economic value because money remains the same, so he came up with charging bearers of paper notes a certain amount of “demurrage fee” regularly to prevent them from hoarding(for instance, to put the stamp of one-hundredth of the face value each month: to be depicted more next time).

This will give a fundamental shift to the financial system as it’s quite helpful for borrowers: lenders see their act as a means rather to get rid of suffering from the monetary loss triggered by the demurrage fee than to increase their asset and even negative-interest loans will be possible when the demurrage fee is high enough: In case the fee is 1% per month = roughly 11.4% per year, it’s better to lend US$1000 to receive only US$950 next year than hoarding it at home and losing more than US$100. The negative interest rate will give more chances to those businesses which haven’t been financed so far due to their low profitability, more people will have access to credits = more freedom to run the business they want and consequently our economy will be more democratically managed.

Although Gesell died in 1930 without witnessing any case at all where his theory is applied, the subsequent history proves that he was right. Next time I’ll deal with a historical success.

Interest rate and long-term projectsMay 1, 2006

The current compound interest is liable not only for what I depicted in the last article but also for pouring money arbitrarily into short-term projects while those with a longer time span find it quite difficult to be sufficiently financed. Stefan Brunnhuber, another German who has been tacking this issue, gives a clear picture on all about it on his book “Wie wir wirtschaften werden”(to be published in English as “Our Future Economy”).

Let’s say that you have two projects to choose from: which project would you invest to?

a) a €10 pine tree which will grow to €100 in 10 years

b) a €10 oak tree which will grow to €1000 in 100 years

The interest rate plays an essential role on your choice although most of you aren’t aware of it: the positive interest rate is synonym of the depreciation of future assets because what will be bigger in the future is smaller in the past. Provided that the interest rate is fixed at 5% per year your € 1000 in 2006 is equivalent to €1628.89(1000×1.05^10) in 2016, but this means that your € 1000 in 2016 is reduced to only €613.91(1000/1.05^10) in 2006. From this viewpoint the pine tree is worth now € 61.39 while the oak tree is only worth € 7.60(1000/1.05^100) and everybody is therefore inclined to plant a pine tree while nobody is interested in oak.

This explains why entrepreneurs rush into China to set up new factories because profits are expected to be brought soon. Long-term projects such as reforestation and education are unlikely to call the attention of the business world because they aren’t profitable in this framework.

But this paradigm will see a fundamental shift as the interest rate changes: future assets can be appreciated instead of being depreciated in case there should be a negative interest rate. The pine tree will be worth €162.89 instead of € 61.39 and the oak tree €131,501.26 instead of € 7.60 with 5% of negative interest rate. This will favor long-term projects or those which will churn out profit constantly, enabling more projects to be financed.

But how can we make a negative interest rate possible? Next time I’d like to deal with this issue.

Tuesday, September 8, 2009

February 2007It Takes a City –how better rules and regulations promote local self-relianceBy David Morris

.....In 1988, Michigan designed a good law. It was a waste law. Every county was required to develop an in-county landfill with a minimum twenty-year capacity to handle the county’s garbage. In return for forcing the county to become responsible for dealing with its own wastes, the state granted it the authority to prohibit the importation of solid waste from other communities inside and outside Michigan. The law did one thing particularly well: it married authority and responsibility. But the Supreme Court overturned the law. The justices insisted that the regulation of garbage is governed by the U.S. Constitution’s interstate commerce clause, so that the states may not impede the flow of commerce, even when “commerce” is garbage, a product society wants to diminish. The Court did uphold the right of Michigan to require its counties to build large local landfills. But by separating authority from responsibility, the Court undermined the objective of the law: to encourage recycling and reduce waste generation. When the county can curb waste imports, any reduction in its own generation of wastes extends the life of its local landfill. That’s an incentive to conserve and recycle. But the Court eliminated the possibility that a town might benefit from high levels of recycling, becauseoutside garbage could soon saturate the local landfill.

The Supreme Court decision was unfortunate, because the Michigan law was exactly thekind we need more of. By marrying authority to responsibility on the local level, it gave communities the power to make changes that would be seen and felt at home: those who made the laws would benefit from the laws. That’s the goal of “local self-reliance,” a philosophy that, after suffering much abuse from the left and the right, may finally be having its day. To many Americans, “local self-reliance” is an oxymoron, a contradiction in terms. In a country with an ideology of personal freedom but with the largest federal government in the history of the world, we’re used to arguments between those who favor the we of big government and those who favor the me of individualism. “Local self-reliance” implies parity between the me and the we, and even, perhaps, the subordination of individual autonomy to the public good — but a public good defined locally, rather than nationally.

Local self-reliance used to be our norm, even if we didn’t know it. In its first twocenturies, the United States’s extreme emphasis on individualism was tempered by thepresence of extended families and close-knit urban neighborhoods, rural communities,and small towns. The close-knit community, the town or city, used to be the unit of self reliance. In the last half century, however, we’ve become more mobile and less rooted. By some estimates, over 70 percent of Americans don’t even know the people next door. Two-thirds give no time to community activities. Fewer than half regard the idea of sacrifice for others as a positive moral virtue. Electronic “virtual” communities replace physical communities. Meanwhile, the scale of public and private institutions continues to grow, and those who make the relevant decisions are ever more remote from those who feel the impact of their decisions.

Today, both left and right, for different reasons, frown upon strong, self-conscious, and self-governing communities. Liberals worry that close-knit communities can be racist,xenophobic, and parochial, a barrier to social progress. They recall the 1950s and 60s, when “states’ rights” became code words for allowing a majority to tyrannize a minority. Liberals also firmly believe that global market capitalism demands bigness in economic and political decision-making. Big government on the national scale is a necessary corollary to big business, a “countervailing power,” in the words of John Kenneth Galbraith. And conservatives’ fear of local self-reliance stems from their hostility to collective decision making, that is, governance at any level, especially if it affects commercial behavior.

Local self-reliance doesn’t so much cut across left and right as it transcends left and right. Local self-reliance argues that strong communities should be valued and nurtured not only for their capacity to enhance personal security but also because of their problem solving capacity. Many, perhaps most, of our global and national problems can most effectively be resolved at the local level. The most effective and enduring decisions occur when those who make the decisions are those who feel the impact of the decisions, where costs and benefits fall on the same community. Societies work best when authority is married to responsibility and capacity, when rules channel scientific ingenuity, entrepreneurial energy, and investment capital into creating systems that allow us to extract the maximum value from local resources — human, capital, natural.

There is no catechism of local self-reliance, but the writings of Adam Smith and Peter Kropotkin offer excellent guides to its moral foundation. Smith’s Theory of Moral Sentiments, an important book, published in 1759 and overshadowed by the fame of its successor, The Wealth of Nations, maintains that an innate human capacity for empathy and sympathy is the foundation of a well-functioning society. A hundred years later, after a painstaking examination of the dynamics of the animal and human kingdoms, Kropotkin went further. “Mutual aid” (which became the title of his seminal book) and not Darwin’s tooth-and-claw struggle for survival, he argued, was the driving force behind innovation and progress. Local self-reliance challenges the reigning economic orthodoxy, embraced by all political parties, that bigger is better and global is best of all. It is remarkable how little empirical data actually supports that thesis. Study after study concludes that in education, forexample, small schools are best. (And is there a better example of the local institution than the public school?) Small schools have less absenteeism, lower dropout rates, fewer disciplinary problems, and higher rates of teacher satisfaction than large schools. According to the Federal Reserve, community-scaled banks are as efficient, and usually more profitable, than large banks. And they serve the community’s small businesses, students, and households better. Small manufacturers generate more innovation and more new employment than big business. Smaller farms are more resource-efficient than larger farms. Smaller cities are more cost-effectively managed than bigger cities. The conventional wisdom that bigger is better emerged from the unprecedented technological dynamic of the late-nineteenth and early-twentieth centuries. Steel replaced wood. Fossil fuels replaced wind and water mills. Mass production replaced cottage industry. Railroads and then cars replaced the horse and buggy. Markets expanded geometrically. Commerce overflowed regional boundaries and became a national and international affair.

We designed rules to fit this new state of affairs. State legislatures granted private electric companies the governmental authority to seize private property to build high-voltage transmission lines, because bigger power plants generated cheaper electricity than smaller plants. Because jet planes reduced the travel time from New York to California from days to hours, Congress preempted state and local authority over jet noise, even though it is one hundred times louder than the noise communities regulate through disturbing-the peace ordinances.

Today, however, the technological and social and political context and dynamic haveprofoundly changed. The newest technologies are potentially decentralizing: personalcomputers, solar energy devices, desktop manufacturing, electric vehicles. Meanwhile,transportation advances are incremental at best. (Indeed, because of airport and roadcongestion, it takes longer to fly or drive from point A to point B than it did twenty-five years ago.) A century ago, the environmental costs of extraction, manufacturing, and transportation were ignored. Today, they are increasingly important, encouraging engineers to design more ecologically benign production systems that often shorten the distance between the raw materials, the manufacturer, and the customer.

The external context has changed, but the rules, for the most part, have not. Institutions and habits and paradigms have an enormous built-in inertia. The conventional wisdom doesn’t change simply because the rationale for it has disappeared. We need new rules, ones that promote local self-reliance.

In the late 1990s, the Institute for Local Self-Reliance established the New Rules Project. The web site, www.newrules.org, contains hundreds of actual rules – codes, ordinances, statutes, and regulations – that foster economic and political local self-reliance. What types of rules might enable local self-reliance? Let’s begin this exploration with a thought experiment. In 1970, Congress enacted the first major environmental law, the Clean Air Act. Among its many provisions was one targeting smokestack pollution. The act ordered factories to increase the height of their smokestacks in order to dilute the concentration of pollutants and therefore reduce their adverse public health impact. But that strategy transformed a local problem, particulate emissions, into the national and international problem of acid rain. What if, instead of raising the height of smokestacks, the Clean Air Actrequired factories to lower them, and to curve the end of the stack so that emissions went into the CEO’s office? We would have married authority and responsibility, eliminating the distance between the actor and the acted upon, imposing the costs and benefits of a decision on the same community. The nation’s CEOs, I believe, would have expeditiously ordered their industrial engineers to design zero-emission production processes.

Now let’s move from theory to practice. Thousands of times a year, local jurisdictions seize private property for a public purpose. The Constitution requires that the property owner be compensated fairly. What would happen if we changed the compensation process to value community? “Fair compensation” is now defined as the market price. Owners of identical houses on the same block would receive the same compensation. But what if one house was occupied by a family who had lived there for three generations while the other had a new owner and newly arrived tenants? Clearly the value of the first property, to the occupants and the city, is higher than the value of the second property. Cohesive communities tend to have lower crime rates and therefore require less in public expenditures. They provide a much higher level of mutual aid to their members, also lowering social costs. It is in the public interest to encourage such communities. How might we take into account the valueof rootedness and continuity? We could pay to both property owners the fair market price as a base, and add a premium based on the length of residency (the same provision could apply to businesses). At a minimum, the result would be more equitable, since long-term renters as well as shortterm owners would benefit. At best, the increased cost could shift the cost-benefit ratio so that the city would abandon the proposed project (a new and possibly unnecessaryhighway, for example).

Cities are beginning to enact new rules that take into account the new, decentralizing technological dynamic. Consider the case of solar energy. Sufficient sunlight falls on our rooftops in most parts of the country to provide all the energy needed by an energy efficient household, with enough left over to power a family’s electric car. Solar cells are becoming attractive for rooftop installations in urban areas. Individual self-reliance – each house producing just its own energy, with no borrowing or sharing – is very costly, because the homeowner would have to install far more solar devices and batteries, or install a backup generator, to meet peak demand. Far better to share our supply and demand via the grid system. Indeed, a 1979 analysis by MIT concluded that the optimum arrangement would be for the household to export 50 percent of the energy it produces and import 50 percent of the energy it consumes. However, many existing electricity rules were written two generations ago to enable one way transactions, from the utility-owned central power plant to the utility-serviced ultimate customer. A homeowner who installs a solar roof array can require the utility to buy the power and sell backup power. But the utility can require the homeowner to install an expensive second meter, and charge the homeowner two to three times more for the utility’s electricity than the utility pays for electricity from the solar array.

No new laws are required to enable individual self-reliance, or self-sufficiency.Homeowners who don’t want to be interdependent can simply uncouple from the grid.But new laws are required for local self-reliance. Over thirty states have taken the first step by enacting net-metering laws. These simple statutes require the utility to provide a single meter to run backward or forward depending on whether the homeowner is a buyer or a seller. In Sacramento, California, the city-owned utility has developed a tariff to encourage what it calls “zero-energy” homes. These homes are not self-sufficient. They are self-reliant. Over the year, their export and import of electricity balance out, making them net-zero energy structures.

Does local self-reliance encourage parochialism and insularity? I doubt it. Self-confident communities, like self-confident people, are better able to deal with strangers and the outside world. And the internet allows communities, for the first time in history, to share information horizontally. Indeed, one could posit a future defined by two metaphors: a global village and a globe of villages. The global village is based on the exchange of information products; the internet is inherently global. The globe of villages is based on the decentralized extraction and processing of raw materials into finished products. It’s one world of information, but many smaller worlds of production. That’s a sane way to balance our strivings for global interconnectedness and local community.

Local self-reliance has three cornerstones: authority, responsibility, capacity. We call it the ARC of community. Without authority, democracy is meaningless. As Alexis de Tocqueville wisely noted, “Without power and independence, a town may contain goodsubjects, but it can contain no active citizens.” Without responsibility, chaos ensues. It is indeed every man and woman and child for themselves, and the public interest be damned. Without a productive capacity, that is, the capacity to produce real wealth, we do not have the practical knowledge to manage our affairs nor the might to determine our economic future. Authority, responsibility, capacity — that’s local self-reliance. It’s a flexible, pragmatic vision that should be attractive to people of all political persuasions, if only they could see past their own slogans and clichés. There’s hopeful evidence that many of them are beginning to. If that’s so, it’s our towns and cities – all of us, that is – who will reap the benefits......David Morris is vice president of the thirty-three-year-old Institute for Local Self-Reliance (www.ilsr.org) and directs its New Rules Project (www.newrules.org). He is the author of five books, ranging from an analysis of the economic and political development of Chile, to an argument for self-reliant cities, to a how-to manual for those wanting to have on-site electricity generation while still being connected to the grid.

Van Jones was recently appointed as a Green Jobs Advisor and cabinet member to the Obama Administration. Before this he was the leader of an organization called Green for All, which advocates that the government should allocate funds for renewable energy and energy efficiency to job training programs for poor folks, especially people of color. It has been suggested maybe even as job training for prisoners upon or before release. He advocates that we do this within the capitalist system, working with profit-making corporations, and has not emphasized equality of pay or worker participation in management of these projects.

Recently right-wingers have accused Van Jones of being a communist in order to have him removed from his position. Upon being questioned many times publicly Van Jones has clearly stated that he intends to work within the capitalist system. He only wants to guide federal dollars spent on energy projects to help poor folks. He is not advocating the overthrow of the capitalist system, just a gentler face. But underneath is Van Jones a socialist? If his goal is to simultaneously build a green economy and indirectly transfer wealth through good jobs to the poor and systemically underprivileged then that sounds a bit like socialism to me. Seizing state power and forcing centralized redistribution of wealth is only one tactic of purported socialism to the same end- people pooling and organizing their resources to take care of each other. This latter conceptualization is I think the heart of socialism, not some cruel, top-down, totalitarian, rationing state.

I am not sure what Van Jones privately believes, if he thinks free market capitalism as a way to structure an economy is sane or not. But I have a feeling his approach is mostly a tactic as a means to an end, indirectly shifting a little wealth and power to the poor. He would not have gotten to be cabinet member if he hadn’t made this compromise of publicly accepting the logic of capitalism. So in a way, I appreciate his smoothness in helping us making a transition towards a more equitable economy.

In the end though, it doesn’t help the anti-capitalist movement which aims to take economic power back from corporations and corrupt federal government and give it to the people, by making capitalism seem not so bad. After all, how bad could it be if it’s giving poor folks green jobs? The point is that we have to keep begging for these small changes rather than requiring that we be regularly at the decision-making table and having our communities in control of our economies. Work your butt off, ask twenty times, and maybe once you will get a yes if it won’t rock the boat too much. Then hope you’ll be able to hold onto that yes and not make too many compromises in the process.

In order to make long-term systemic change, we need to call capitalism out for what it really is- a system that inherently rewards profit over people and the planet and in the process of making that profit must exploit human and natural resources. Socialism as a paradigm rewards work first that benefits most people and at its best, works to heal nature, too. I think capitalist logic is incompatible with the world Van Jones wants to see. And I think he could go a step further in applying socialist principles of greater pay equality and worker/consumer management within these projects.

So I hope one day Van Jones will proudly someday call himself a socialist and tell it like it is- socialism is people taking care of people and the Earth and greater equality for all. Or we could just call it Green for All!

A dear friend of the earth, a staunch defender of justice, and a bold champion for a solar-powered America has just been forced out of the Obama Administration through a clever campaign of deceit, malice, and fear. FOX News’ right-wing attack dog, Glenn Beck, and his supporters cherry picked statements from Van Jones’ past, mercilessly branded him a “communist”, and wrapped up their bogey-man caricature in a bow with dire warnings of plans to destroy the “America we all grew up in.”

Having worked closely with Jones at the Ella Baker Center for Human Rights, I can attest to his steadfast commitment to working within the system – harnessing the promise of our much-heralded free market and democratic institutions – to build a “green economy that lifts all boats.” Far from some lefty ideological plot, our Green-Collar Jobs Campaign brought together a broad range of established players in the local economy – businesses, educators, environmentalists, job trainers, unions, and yes, even some of those pesky community organizers – to launch the Oakland Green Jobs Corps.

Thanks to the incredible work of Green For All, the Apollo Alliance, and others, this model has spread like wildfire across the nation, inspiring dozens of states and cities to launch their own efforts putting the unemployed and underemployed back to work retrofitting our buildings, installing solar and wind systems, and greenscaping our urban centers. It’s no exaggeration to say that Van’s vision of fighting poverty and pollution simultaneously through green-collar jobs has catalyzed a movement – and earned him the admiration of people across the political spectrum. Indeed, his hard-won federal Green Jobs Act, committing $500 million toward green job training, was initially signed in to law by none other than the leftist radical President George W. Bush.

But all of these political smear tactics are really just a cover for the real reason Jones was targeted: his vision of a truly inclusive green economy is catching on, and it actually is a threat to business as usual. One of FOX’s commentators, Phil Kerpen, misplaced the threat at the doorstep of creeping Soviet-style socialism, asserting that Van’s “‘green jobs’ concept was merely a new face on the old ideology of central economic planning and control, an alternative and a threat to free market capitalism.” Fear-mongering knows no bounds.

Given the scores of decidedly pro-market corporations, trade groups, and financial services firms partnering with the Jones-affiliated Apollo Alliance (see full list here), Kerpen’s claim is laughable on its face. On a deeper level, however, Jones’ vision of an inclusive green economy is profound in that it forces Americans to acknowledge their segregationist past and to take a stand for an ecologically sound future in which all of us can thrive. Now that’s radical. It’s also vital if we’re to make it as one nation through the increasingly troubled waters of climate instability, the twilight years of cheap oil, and what’s likely to be a protracted period of economic decline.

As a middle-class white activist, I have a choice: I can ignore the fact that every day, I’m held up by centuries of hard work by formerly enslaved Africans, along with better schooling and job opportunities thanks to decades of racial discrimination against their descendants by schools, banks, and corporations. Or I can acknowledge these advantages, and work to neutralize them as a way to fulfill America’s promise of equality for all under the law.

Building a truly inclusive green economy will demand a level playing field in education, job training, and hiring for those from low-income communities and among the historically underserved. We have the resources to do this, but will privileged Americans extend a hand of partnership across race and class to build the pathways out of poverty into green prosperity that Van has called for? Or will they succumb to bitter hatred, Glenn Beck-style?

Van’s effective and passionate calls for a clean energy economy must have worried America’s old energy CEOs, whose deep pockets typically leave no politician behind. Earlier this year, International Energy Agency Chief Economist Fatih Birol warned that the world is headed for a catastrophic energy crunch by 2020, thanks to the plummeting output of the world’s oil fields. Given that oil is the lifeblood of industrial civilization, learning to make do with less and less of it while transitioning to renewable energy is now all the more urgent. If the green economy message gets too widely accepted, that could mean a shift in billions of investments and subsidies away from fossil fuels toward energy efficiency, clean power, and alternative transportation systems. Heaven forbid!

So a green economy that lifts all boats may not be as easily accepted as we advocates have come to believe, at least not while vested interests are controlling the debate and scaring people from seeing its true promise. Van’s ousting is truly a wake-up call for deeper thinking about how to build a broad-based, resilient movement that can counter these challenges head-on, and to connect more deeply with Americans from all walks of life about how an inclusive green economy cannot only heal our troubled planet, but also heal our troubled past.

Despite this setback, Van will undoubtedly continue on as a powerful advocate for green-collar jobs. And our movement, against the odds, will surely grow by leaps and bounds. Fear cannot stop a potent vision such as this.

TAKE ACTION!

* Green For All, a national organization Jones founded, has issued the following statement: “[Now] is the time to come together around the values our movement stands for: clean air, healthy communities, good jobs, and opportunity for all.” Please sign the Petition in support of the Green Jobs Movement. * An independent “I Stand With Van Jones” Facebook campaign has already attracted thousands of supporters within the first day of its launch. Take a moment to Stand With Van through Facebook.

Aaron G. Lehmer is the Co-founder and Network Development Director of Bay Localize, an Oakland-based nonprofit working to build a stronger, more self-reliant Bay Area. He was formerly the Policy Director for the Ella Baker Center’s Green-Collar Jobs Campaign

Saturday, September 5, 2009

A few dozen local businesses in Pittsboro, N.C., banded together this spring to distribute the Plenty, a local currency intended to replace the dollar. Now 15,000 Plenties are in circulation used everywhere from the organic food co-op to the feed store to, starting this month, the Piggly Wiggly supermarket.

By Nicholas RiccardiLos Angeles TimesSeptember 05, 2009

PITTSBORO, N.C. — The stimulus for this mill town turned artist's colony arrived in the form of green bills bearing sketches of herons, turtles and trees.

A few dozen local businesses banded together this spring to distribute the Plenty — a local currency intended to replace the dollar. Now 15,000 Plenties are in circulation here, used everywhere from the organic food co-op to the feed store to, starting last month, the Piggly Wiggly supermarket.

Last popularized during the Great Depression, scrip, or locally created stand-ins for U.S. currency, is making a comeback. Pittsboro, population 2,500, is one of three communities that launched its own money in recent months. It reports an avalanche of calls from other communities that have lost faith in the global financial system.

"The Plenty is not going to get siphoned off to Wall Street, or Washington, or make a stop in Bentonville on its way to China," said B.J. Lawson, a software entrepreneur who is president of the board of the Plenty cooperative. "It gives us self-reliance."

Over the past two decades, a few communities have created their own cash in an effort to preserve local ties or businesses. These whimsically named bills — such as the "BerkShare" or the "Cheer" — can be spent at neighborhood merchants, who then can use them at other local shops or, should they choose to, trade them in for federal currency or other goods.

So far, none of them face the extreme pressures that popularized scrip during the Depression — bank failures that dried up the supply of cash in circulation, requiring governments to come up with novel ways to keep commerce alive.

"Right now there's a lot of interest because of the economy, but a lot of these efforts come about to rebuild social capital," said Ed Collom, a sociology professor at the University of Southern Maine who studies local currencies. "There's been concern about lack of trust, neighbors not knowing each other. They see this as a way of neighbors helping each other."

In Detroit, for example, the Cheer was created not due to the city's chronic financial woes but because bar owner Jerry Belanger wanted to encourage patrons to support new local businesses. He issued notes good at neighborhood merchants, backed by a cash reserve at his bar. The idea caught on fast, and other taverns agreed to help back the currency. There are now $3,000 worth of Detroit Cheers in circulation after about four months.

"It's like a wink or a secret handshake," Belanger said. "People want to demonstrate they care about the community."

In Mesa, Ariz., a suburb of 450,000 east of Phoenix, the motive has been purely financial. The city has no property tax and relies almost exclusively on its sales tax. Receipts plummeted 12.5 percent in the last quarter of 2008. Johann Zietsman, director of the city's Arts Center, noticed that only 30% percent to 40 percent of seats were selling as people tightened their belts.

Thus was born Mesa Bucks. Shoppers who spend money at stores in the city limits can bring their receipts to the Arts Center and receive a percentage of the sales tax they paid as Bucks. Right now the currency can be spent only at the Arts Center and city museums, but officials are talking with two malls about distributing them and believe some local merchants will accept Bucks.

"Everybody is having a tough time," Zietsman said. "Incentives are always popular."

The western New York college town of Ithaca is believed to be the first community in recent memory to have revived scrip by starting the Ithaca Hour in 1991. Other places, including Portland, Maine, and Traverse City, Mich., followed suit.

In western Massachusetts, activists and a local nonprofit banded together in 2006 to create the BerkShare. Since then, 2.5 million BerkShares have circulated in the leafy towns of the Berkshire Mountains. Residents can exchange $95 for 100 BerkShares, giving an incentive to use the scrip.

Susan Witt, executive director of the E.F. Schumacher Society, which advocates scrip and other ways to build local economies, helped create the BerkShares. She said that as recently as the early 20th century, banks issued their own scrip that would be used in towns and cities across the country.

"We gave it up for the convenience of a national currency," Witt said, adding that it remains legal to mint your own money. "Regions opened themselves to being vulnerable to the ins and outs of the national economy."

The Plenty — or Piedmont Local EcoNomy Tender — first launched in 2002 in another central North Carolina community. It quickly folded because the bills piled up in the few businesses that would accept them, a problem that experts say dooms the majority of scrips. Residents in Pittsboro, a collection of stately clapboard homes and repurposed brick warehouses 17 miles south of the university town of Chapel Hill, decided to try again this spring.

The new incarnation of the Plenty can be exchanged for dollars at a bank in Pittsboro, and backers say they are trying to diversify the businesses that will accept the bills. Melissa Frey, who administers the Plenty cooperative, noted that a local chiropractor and an aromatherapist have agreed to take Plenties, but no mainstream health providers or gas stations have signed on.

Though local activism spurred the currency's revival, Frey said, businesses seem increasingly receptive because of the recession. "It does happen to be the right time to sell this program to people."

The bills are designed and printed by local artists, with a wide variety of designs and serial numbers to combat counterfeiting. A couple of businesses in town already pay employees partly in Plenties. Proponents are most excited that the local Piggly Wiggly — a franchise owned by a local family — has agreed to start accepting the currency.

Owner Blake Evans said he has "low expectations, but long-term, maybe it'll be something that catches on." He has been explaining the concept to his employees, some of whom had concluded that the motto on the bills, "In Each Other We Trust" (printed in soy ink on 80 percent recycled paper), meant the currency is anti-religious. "It certainly is not," Evans said.

One of the anchors of the Plenty is the General Store Cafe, a cavernous eatery and deli where, waiters report, customers have regularly been leaving Plenty bills as tips. Owner Vance Remick said that when people use the Plenty it feels more like a personal transaction — the sort that could only occur in a unique community.

Wednesday, September 2, 2009

“When I gave bread to the poor they called me a saint; but when I ask why the poor have no bread, they call me a Communist.” Archbishop Dom Helder Camara

Currently in the US the top 20% of the population own 80% of the wealth and the bottom 80% own 20% of the wealth. This begs the question what the hell they are doing with all that excess wealth while the rest of us are struggling to survive? Some of them are giving to pretty good causes. Bill Gates, the wealthiest man in the world, is donating money to help eradicate infectious disease in Africa. I am all for helping out Africa, but I question whether or not Bill Gates, a privileged white man from the USA, is the best person to be deciding the fate of Africa. And this is not wealth redistribution, it is funding specific charitable organizations handpicked by the Gates Foundation. Charity can have harmful unintended consequences: conservation programs that displace indigenous people, careless technology introduction that destroys cultures, energy projects that end up benefiting the rich and further impoverishing the poor, industrial agriculture programs that lead peasant farmers away from traditional sustainable agriculture, and creating economic dependency on unreliable foreign money. Additionally, there are often malevolent intentions for these projects as well, such as creating profit for corporations involved in the implementation of these projects instead of employing and empowering local people to run the projects. Then they may make the local people indebted to these corporations and banks for projects that marginally benefit them if at all.

Nonprofit organizations in the US are not immune to these kinds of problems though they may be more subtle. After working for over 12 years in the nonprofit world, I came to realize that funding through foundations, corporations or philanthropic individuals comes with many strings attached. The strings are there before you even solicit funding. The work of the organization, especially whether or not it challenges the economic status quo, will highly influence whether or not the organization is fundable. You may even choose not to do work that is probably not fundable- it is scratched off the drawing board from the get go. Then when you go to apply for funding, you moderate your request so as not to sound too challenging or radical and to some degree you have to stick to that in the implementation of your project or else you won’t get funded again. Or maybe you will lose your tax exempt status. This is why it is notoriously hard to get funding for projects that challenging the economic power structure. Why would a foundation or philanthropist fund work that challenges the source of their wealth and power? Do socialist-leaning organizations or grassroots alternative economic projects get funded as easily as pro-capitalist projects? This is not just my take, I have heard this over and over again from all kinds of nonprofit professionals.

So here we are decades post civil rights, women’s and the environmental movements’ beginnings. What’s changed? The Earth is being destroyed faster than ever, women and people of color still make a fraction on the dollar for the same work and same experience background, the rich are wealthier and the poor are poorer. Wars are raging on all over the world, often fighting over resources.

We have green businesses and worker cooperatives, but they are forced to compete with corporations that unethically exploit human and natural resources- sweatshops and polluting factories- hoping that consumers will want to and be able to spend their increasingly dwindling income on their more conscientious product. And there is only so much money to go around especially in times of recession. Nonprofits pit against each other for crumbs to stay alive and work at least as much on propping up their image as in doing the actual work, because in the world of funding as in the business world, image counts a lot.

So how do we change the system so that we are not always begging for crumbs from people who have no real connection to our problems and may not really want to solve those problems anyway? Let’s start with redistribution of wealth. Land and labor are the bases of wealth so let’s reclaim our land and our labor. How do we do that? We take back our land by eminent domain, occupation, taxation, and legal redistribution. Then we turn it over to the people to collectively run it based on good principles of earth stewardship and equality. We start urban farms that create healthy food for those that need it most. We tax commercial value of land and put the revenues into community land trusts. We abolish future absentee landownership (land as profit rather than land as place to live), which make real estate unaffordable to the people who actually live in the area. We turn land and buildings over to the people living and working in them to be owned and run collectively through community land trusts, which take land off the market to some extent. Occupation of land or eminent domain is often morally justified in that the people who owned the land for the most part did not earn it through hard work and their ownership does not benefit the people. It is hard to start and maintain a community project, an organic farm or a worker cooperative when you are facing outrageous land values that make rent challenging and ownership nearly impossible.

How do we take back our labor, our time? We start worker cooperatives that enable people to allow people to determine how they work together and what they do with their time and to keep their wealth in the community. We start community currencies to enable people and business to not have to wait until money flows their way or to wait for enough of it to be available in general. The people know what needs to be done, they just don’t have the money to do it, because the funding isn’t there, there aren’t enough US dollars floating around, and credit is only available to the well established. People are chained to their 9 to 5+ jobs that transfer their labor profit to someone else, often a corporation outside their community. Without these jobs, they would not survive, unless there were other sources of money and sustenance. If communities created their own money, they could lend them to community projects, cooperative business startups, and individuals to be self-employed. In general there would be three times the wealth in the community to fund local employment and community projects as wealth wouldn’t be leaking from the community into the pockets of corporate CEOs and shareholders. This would also increase local government budgets through a bigger tax base in order to fund projects for the common good. Small businesses wouldn’t have to wait for a bank to lend them credit at interest rates that they can’t repay. They would lend their credit to each other through mutual credit like the WIR Bank in Switzerland does. Community currencies make money available for projects, organizations and businesses that would be hard to get scarce US dollars for.

We should ban corporations and chain stores from participating in the local economy in areas where local business could provide needed community services and goods. If those businesses don’t already exist, then we need to support job training for community needs and funding for import replacement businesses. To redistribute wealth within businesses there should not only be a minimum living wage (or a basic guaranteed income for all), but a maximum wage as well. The ratio, according to Aristotle should be no more than 1:5. When some people are making much more that others, not only are the poor bringing in less money, but their relative purchasing power goes down and they also are spending any extra cash on paying back credit cards and loans rather than high return investments. The poor lose power in government to get the things they do need as they are pitted against corporations that give money to political campaigns. Corporations fight to pay less taxes and get more money for infrastructure that benefits their business more than the public good.

What are local governments spending their budgets on? Even when they are trying to do something as honorable as shifting their energy supply towards renewable energy, do they train and employ poor local folks to do the work or do they contract with outside corporations? When they are deciding whether to fund public transportation or roads, which do they prioritize? Public transportation benefits poor people most and roads benefit business most so we end up spending most our money on road infrastructure. I believe if the people of these municipalities were to be involved in budgeting and project implementation, budgeting priorities would look very different. And those funded projects would create more long term benefits for the community with greater benefits shifted to the poor. This is called participatory budgeting. It separates the financial interests that buy government officials from decision-making about where funding should go.

Even before some of these structural changes are in place, we can decide to focus our energy on just making the alternatives happen even without funding. Instead of taking that trip to Hawaii with your family, help reclaim a lot for community food production, volunteer to put solar panels and energy efficiency devices in poor folks homes, or volunteer at a community clinic. Invest the money that you do have in community projects instead of mutual funds. Share with your neighbors tools, housing, transportation. We already have a lot of untapped power. Let's start using it for good.

I believe that if we stop spending so much time on begging for crumbs from foundations, corporations and corrupt government, we will create more lasting, effective and dramatic changes to the economic power structure. We need to focus our energy on taking our power back rather than appealing to those that already have power. The Zapatistas are doing it, why can't we?

About Me

"Resolve to serve no more, and you are at once freed. I do not ask that you place hands upon the tyrant to topple him over, but simply that you support him no longer; then you will behold him, like a great Colossus whose pedestal has been pulled... away, fall of his own weight and break in pieces." -Etienne de La Boétie *Feel free to copy any posted material. Attributions to writers are recommended, but the commons prevail here.